Journey Towards Unity
Sonia Nellie Samuel (Creative Director, 2020/21)
MACRO INSIGHTS 2020/21
Introduction
Despite consisting 54 counties, some of which are the amongst the fastest growing economies in the world, Africa has the lowest trade within the continent in the globe. Since the 15th Century, Africa trade has been directed primarily with countries outside the continent than within.
Why? Inadequate infrastructure, excessive regulations and requirements at customs increases the cost of trade making it difficult to trade particularly for retail traders.
Beginning of a New Era
Over the years, leaders of numerous African nations recognize the potential Africa has to be the largest free-trade areas in the World. With that awareness and desire to bring Africa to a new era of industrialization and business opportunities, many partners and institutions have been actively working towards that dreams since 1963.
1963 - Launch of the Organisation of African Unity (OAU). OAU aimed to promote cooperation between African states. (Precursor to the African Union)
1980 - The Lagos Plan of Action (1980–2000)
The Lagos Plan of Action(LPA) is a blueprint formulated and adopted by fifty African countries at Lagos, Nigeria, in 1980.
The aim of the plan was to establish a program for development, self-reliance, and economic integration. More specifically, to minimized Africa's links with Western countries by maximizing Africa's own resources.
Many regional cooperation organizations, such as the Southern African Development Coordination Conference were created.
1991 - The Abuja Treaty was adopted on 3 June I991 and enforced on 12 May 1994. The treaty has been signed by all member states of the Organization of African Unity (OAU), except Eritrea provides for the creation of an African Economic Community through a gradual process of co-ordination, harmonization and progressive integration of the activities of existing and future Regional Economic Communities (RECs) in Africa. This will be done in six successive stages over a period of 34 years.
Stages:
Strengthening and creating RECs within the first 5 years. RECs include eight sub regional bodies which are the building blocks of the African Economic Community. They are:
Stabilisation of tariff and other barriers to regional trade and the strengthening of industry and energy (next 8 years) sectorial integration particularly in the field of trade, agriculture, finance transport and communication.
Establishment of a free trade area (further 10 years)
Harmonisation of tariff and non-tariff systems (2 years)
Establishment of a Common Market and the adoption of common policies (4 years)
Integration of all sectors, establishment of a Central Bank and a single African currency, setting up an African Monetary Union and creating and electing the first Pan-African Parliament
2002 - The OAU was succeeded by the African Union (AU). AU was developed to create a new continental organization to build on its work which had as one of its many goals to accelerate the economic integration of the continent. To ensure the achievement of this and the many other goals, Agenda 2063 was developed as a strategic framework.
2012 - Endorsement of the Action Plan on Boosting Intra African Trade, BIAT (theme of the 19th African Union summit held in Addis Ababa). The Action Plan aims at deepening Africans market integration and significantly increasing the volume of trade that African countries undertake among themselves. To effectively achieve this, the plan is divided into seven clusters namely, Trade Facilitation, Trade Policy, Productive capacities, Trade related Infrastructure, Trade Finance, Trade Information and Factor Market integration. At the summit leaders also agreed to create a new Continental Free Trade Area(CFTA) by 2017.
2015 - Summit of the Africa Union in Johannesburg launched the CFTA negotiations. The CFTA builds on existing Tripartite FTA negotiations amongst three African regional economic communities (RECs): the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africsa (COMESA) and the East African Community (EAC), although it would like to incorporate all other African RECs too.
The objective of launching negotiations for the CFTA is to achieve a comprehensive and mutually beneficial trade agreement among the Member States of the African Union. More specifically, to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Continental Customs Union and the African customs union. Furthermore, to expand intra--African trade through better harmonization and coordination of trade liberalization, as well as the creation of better facilitation regimes and instruments across RECs and across Africa in general. Moreover, to resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes. Lastly, to enhance competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources.
CFTA has seven priority areas related to trade: policy, infrastructure, finance, information, market integration, boosting productivity and trade facilitation.
Why Africa needed CFTA :
Africa is the world’s poorest and most underdeveloped continent with a continental GDP that accounts for just 2.4% of global GDP yet Africa has approximately 30% of the earth’s remaining mineral resources. Furthermore, the continent has the largest reserves of precious metals with over 40% of the gold reserves, over 60% of cobalt, and 90% of platinum reserves.
The continent’s export markets are relatively more diversified and industrialized than markets outside the continent,13 and therefore offer significant opportunity for industrial upgrading. Although intra-African trade has risen significantly over the last twenty years, it still remains low when compared to other regions. Intra-African exports and intra-African imports were 17.7 per cent and 13.6 per cent respectively in 2015, compared to 66.6 per cent and 65.7 per cent for intra-European exports and imports in Europe.
The impacts of trade and investment liberalization are not distributed evenly between or within countries. The different needs of different sectors of the population, paying attention to the most disadvantaged and vulnerable amongst these needs to be taken into account. Some markets are too small to justify investments, since both adequate supply of inputs and sufficient client base remain too expensive or out of reach.
2017 - In February, four meetings were held, where technical issues were discussed and implemented in the draft. On March 8–9, 2018 the African Union Ministers of Trade approved the draft for CFTA.
2018 - African leaders gathered in Kigali on 21 March 2018 (Kigali Summit), and took a bold step in favour of trade and of the economic integration of the continent. Three separate agreements were signed: the African Continental Free Trade Agreement, the Kigali Declaration; and the Protocol on Free Movement of Persons (Phase I of the agreement).
44 countries signed the AfCFTA, 47 signed the Kigali Declaration, and 30 signed the Protocol on Free Movement of People. While a success, there were two notable holdouts: Nigeria and South Africa, the two largest economies in Africa.
The eight separate free trade areas and/or customs unions, will continue to exist.
2019 - Negotiations for Phase II began in February 2019. These negotiations will cover protocols for competition, intellectual property, and investment. Negotiations on Phase II issues are expected to finish in 2020 however it was delayed due to COVID-19 pandemic. As of July 2019, 54 of the 55 African Union states had signed the agreement, with Eritrea the only country not signing the agreement.
Nigerian Opposition - Nigeria was the last nations to sign the agreement. At 200 million people, Nigeria is Africa's most populous country with a nominal GDP of US$376 billion, or around 17% of Africa's GDP. AfCFTA hit a hurdle in 2018 when Nigeria pulled out days before the country was due to sign the agreement. President Muhammadu Buhari said he needed further consultations in Nigeria. Nigeria has a lot to gain from increasing access to its goods and services to a wider African market however a key concern was whether the agreement adequately prevented anti-competitive practices such as dumping.
2021 - Africa officially started trading under the African Continental Free Trade Area (AfCFTA) Agreement.
The AfCFTA represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion.
Implementing AfCFTA woulds :
Lift 30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others who live on less than $5.50 a day.
Boost Africa’s income by $450 billion by 2035 (a gain of 7 percent) while adding $76 billion to the income of the rest of the world.
Increase Africa’s exports by $560 billion, mostly in manufacturing.
Spur larger wage gains for women (10.5 percent) than for men (9.9 percent).
Boost wages for both skilled and unskilled workers—10.3 percent for unskilled workers, and 9.8 percent for skilled workers.
Some smaller companies may be worried they will not be able to compete with continental giants and multinationals. The AfCFTA is negotiating a protocol on competition policy this year which aims to create a level playing field for all firms.
Conclusion
Africa has grown significantly since the year 1963 in numerous economic aspects. Evident from AU plans and goals in place, the growth of Africa is only expected to expand. Yet, there are concerns and challenges that should not be disregarded. For instance, The impact of the Covid-19 pandemic to AfCFTA, Commitment to integration varies across countries and major obstacles that would prevent AfCFTA from reaching full potential should it not be dealt with; poor road and rail links, political unrest, and excessive border bureaucracy.